Eight Tips for the "Microsoft iPod" Team

With the exception of the Xbox and a line of PC keyboards and mice, Microsoft has largely kept out of the hardware business. According to reports published last week, however, the company plans to take on Apple and other gadget makers directly, launching its own Microsoft-branded media player in time for the Christmas holiday shopping season.

Reviving rumors circulating since a Reuters report in mid-June, entertainment industry executives privy to Microsoft’s plans told the New York Times last week that the Microsoft media player will have a larger screen than the industry-leading Apple iPod, and will download data wirelessly using a built-in Wi-Fi chip. Microsoft is reported to be in negotiations with recording studios and television networks to sell music and videos tailored for the device through an Internet site similar to Apple’s iTunes Music Store.

Microsoft told the BBC on July 7 that talk of a Microsoft rival for the iPod amounted to “rumors and speculation.” But the company didn’t directly deny that a portable media player is in the works, merely saying it had nothing to announce on the subject.

If the rumors are true, the project underscores a gradual strategy shift underway at Microsoft, as it adapts to an era in which more and more digital content is being delivered to devices other than PCs. Those devices need software too, creating a new market Microsoft isn’t willing to cede to competitors – as its investment in mobile-phone operating systems and other alternatives to its bread-and-butter desktop software products shows. By building its own media player – Lance Ulanoff of PC Magazine has cleverly christened it the “MiPod” – Microsoft could solidify its place in the era of mobile digital content, and would no longer need to rely on manufacturing partners to design and market devices using Microsoft code.

But any company entering the media-player market must contend with the iPod. Apple rivals such as Creative Technologies, Samsung, and iRiver offer devices with comparable capabilities, but have barely dented the iPod’s 80 percent market share. Microsoft, meanwhile, has a mixed record in the hardware business. The Xbox 360, for example, has wooed many advanced gamers away from Sony’s PlayStation 2 – but it has yet to turn a profit, thanks in part to high manufacturing costs. And Microsoft lacks Apple’s marketing savvy and cult following, especially among youth.

Can Microsoft hope to produce a real iPod killer? Many observers are skeptical. Yet Microsoft has enjoyed a number of come-from-behind victories. If product developers in Redmond have studied the mobile-media market closely and learned from Apple’s successes (and failures), the MiPod has a chance of becoming a credible rival to the iPod.

There are a few specific steps Microsoft could take to help the MiPod gain a foothold – though it may already be too late, if the company is really aiming for a year-end release.

1. Keep It Simple.In other words, don’t use Windows as the MiPod’s internal operating system. With Windows CE and its successor Windows Mobile, Microsoft has demonstrated an almost obsessive preoccupation with adapting its core operating system product for devices other than PCs. But many of these devices have limited functions or run only one program at a time, which means Windows – with its submenus-within-submenus-within-menus – is overkill.

A case in point is the Motorola Q, a new smart phone designed by the same team that built the highly popular Razr. The phone is winning praise for its thin form factor, convenient keyboard, and high voice quality. But it is being faulted for its needlessly complicated software interface, which depends on Windows Mobile 5.0.

Microsoft engineers are doubtless under pressure to build the MiPod around either some permutation of Windows or the company’s existing Windows Media Player software. But the appeal of the most successful handheld gadgets lies partly in the fact that they aren’t as fussy and complex as PCs or desktop software. Microsoft should start from scratch.

2. Reinvent the Online Media StoreApple’s iPod/iTunes business is the envy of many other companies because it’s “vertical.” Apple controls an entire mobile media ecosystem, from the copy-protected AAC format of the original music and video files to the gadgets that play these files and the software customers use to purchase, download, and store them. It doesn’t have to share its revenues with anyone except the record labels and TV networks that create the content. If it weren’t interested in creating such an ecosystem for itself, Microsoft wouldn’t bother to build its own portable media player.

Microsoft already has its own music and video formats, Windows Media Audio and Windows Media Video (those files on your computer with the extensions .wma and .wmv). If last week’s rumors are true, it’s also working on the player gadget. The last piece is the PC interface and media store.

Beating the iPod will be tough – but when it comes to iTunes, there’s plenty of room for improvement. iTunes predated the iPod by almost a year, and was designed as a general media player for the Mac. As a bridge between a PC and a portable player, it still lacks the easy, intuitive style one would expect from Apple. Dumped into iTunes, the thousands of music and video files an iPod owner is likely to purchase or rip from CDs become a disorganized mess. Determining which files are stored on one’s PC and which on one’s iPod, and whether the two are correctly synchronized, requires careful attention. iTunes’ online component, the iTunes Music Store, is far more confusing to navigate than true retail websites such as Amazon. Surely, Microsoft’s legions of software developers can do better.

They aren’t off to a promising start. MSN Music, the company’s music portal, has negligible sales compared with the iTunes store, and doesn’t even work in the popular Firefox browser. And Urge, an online music store developed by Microsoft for MTV, is a slavish imitation of the iTunes store, the main difference being that songs purchased at Urge will play only on PCs or mobile devices that run Windows Media Player.

3. Put Wireless Connectivity to Good UseIt’s not clear how Microsoft might put Wi-Fi to work in its rumored media player. There are a few ways Wi-Fi could help – and more than a few that would seem pointless.

Wi-Fi isn’t particularly needed, for example, as a replacement for the USB and FireWire cables that connect today’s media players with their owners’ PCs. With Wi-Fi, users would still have to be in the same room with their PCs. And while Wi-Fi transmits data faster than USB or FireWire, the difference isn’t big enough to save noticeable amounts of time.

Users of Wi-Fi media players might also be able to connect to a music store from a Wi-Fi hotspot (say, a Starbucks) and shop for TV shows and music directly from their players. But an even more interesting application of Wi-Fi would be to let MiPod users trade music and videos wirelessly, either with other people within Wi-Fi range or with friends using MiPods and some type of instant-messaging interface to communicate over the Internet.

Media sharing is one of the fastest-growing forms of interaction within online social networks, and it’s a feature available on a growing number of cell phones. MusicGremlin is already going in this direction with its wireless Gremlin music player, which allows users to “beam” songs to one another. Microsoft may be thinking along similar lines. According to a follow-up report in the New York Times, “A person who works closely with one of the music labels said that the Microsoft device would permit users to play songs wirelessly from other Microsoft players in the vicinity. Users could ‘tag’ music that looked interesting and then play it one or more times without paying for it, this person said.” Good thinking. The more MiPod-owning friends a person has, the more incentive he or she would have to buy one.

4. Be Less Paranoid about SharingBut for Wi-Fi sharing to work, Microsoft would need to work out compromises with content producers that lighten digital rights management (DRM) restrictions that it and other companies place today on most commercial digital content. Songs purchased at MSN Music, for example, can be transferred to CD or portable players and played on up to five “authorized” PCs owned by the customer, but won’t play on friends’ computers. Apple’s own FairPlay DRM system also places tight restrictions on sharing, but does allow songs from one customer’s iTunes library to be streamed to other computers on the same local-area network.

Microsoft has almost a decade of experience with DRM technologies, and longstanding relationships with music, TV, and movie industries. It should be able to convince content producers that sharing doesn’t always equal piracy, and negotiate rights that allow sharing but also make it easy for the recipients of shared files to buy their own copies, if they want to listen or watch again. According to the Times, the terms of the rights needed to enable the wireless streaming function “had yet to be worked out.”

5. Reach Out to Podcasters and VodcastersRight alongside the commercial songs and TV shows on many people’s iPods are gigabytes of free content, including podcasts and vodcasts (video-on-demand-casts). And making and listening to amateur podcasts isn’t the geek pastime it once was: already, the free-podcast section of iTunes has celebrated its first birthday. It would serve Microsoft well to engage the community of podcast producers and listeners from the beginning.

For example, the company could solicit podcasters’ suggestions about new features that might make the MiPod and the Microsoft music store more hospitable for user-contributed content. It could involve them in beta tests of the hardware and software. It could tailor DRM technology for producers who prefer using Creative Commons licenses and other forms of “copyleft” to the standard system of copyrights. Courting podcasters with real attention and real improvements on existing media player technology would virtually guarantee positive buzz when the MiPod hits the market.

6. Integrate Broadcast Radio and TV ProgrammingTime-shifting – consuming broadcast content at your own convenience, rather than the networks’ – is as old as the VCR. Devices like the TiVo digital video recorder have updated time-shifting for the digital age. But it’s still a forbidding, multi-step process to capture live radio or television for later consumption on a portable player.

iTunes includes a directory of hundreds of Internet sites that stream live radio – but no recording capability. For that, users must turn to software such as ReplayRadio or PC accessories such as Griffin Technologies’ Radio Shark, which turn Internet radio broadcasts into MP3 files that can then be transferred to a portable player. TiVo offers a system that transfers recorded shows from a TiVo DVR to a computer, where they can then be converted and compressed into a format that’s viewable on a video iPod. But while the system is dubbed “Tivo To Go,” it’s hardly as simple as getting take-away food.

Taking radio and TV with you on your portable player shouldn’t be for geeks only. Microsoft could get a leg up on Apple by making the MiPod into a true Tivo To Go. The Media Center version of Windows XP already includes a DVR capability for customers who install a TV-tuner card in their PCs. Why not build this capability into all versions of Windows Vista, and build in a compression utility that can automatically prepare the files for a MiPod?

7. Use a Reliable BatteryThe iPod has not been immune to criticism. Consumers have long complained that its glossy casing is too scratchable and that the device’s internal software sometimes goes haywire. But Apple’s biggest customer-service headaches, by far, have come from the iPod’s lithium-ion batteries.

All lithium-ion batteries slowly lose capacity as they are repeatedly drained and recharged. In the case of the iPod, Apple says the dimunition should be too small for users to notice over the lifetimes of their devices. But some owners of first-, second-, and third-generation iPods (those sold before 2005) claimed that their devices’ batteries lost capacity much faster than expected. Since the iPod’s case is not designed to be opened by users, these owners couldn’t replace the batteries. So they sued – and Apple agreed in a 2005 out-of-court settlement to compensate them or extend their warranties to cover the problems. These days, Apple will replace the batteries of mailed-in iPods for $59.

For mobile gadgets, there are still few alternatives to lithium-ion batteries. But Microsoft has the opportunity to shop around for a supplier whose batteries that can be recharged more times before wearing out, and that last longer between rechargings. (The current number to beat is 20 hours, the battery life claimed by Apple for the 60-gigabyte video iPod.)

8. Hire New Product MarketersA parody showing how Microsoft package designers would debase the artsy, minimalist Apple iPod box with stickers, bullet points, and endorsements was one of the most popular underground videos circulating on the Internet this year. (One copy of the video on YouTube has been viewed nearly 550,000 times.) Surprisingly, the video was produced at Microsoft’s behest. “It was an internal-only video clip commissioned by our packaging [team] to humorously highlight the challenges we have faced re: packaging and to educate marketers here about the pitfalls of packaging/branding,” Microsoft spokesman Tom Pilla told The iPod Observer by e-mail in March.

That Microsoft is developing an awareness of its own design stumbles is a positive sign. But giving the MiPod anything like the cool factor enjoyed by the iPod will require a much bigger step: leaving behind Microsoft’s corporate culture of “more is more,” in which improving a product means adding new features, or improving a product box means adding more text. That’s what led to real product boxes like this one for Windows XP, and to software like Microsoft Word, which is used by millions but has dozens of menu items, toolbar buttons, and advanced functions that most people never touch.

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Doing these eight things won’t guarantee a successful launch for the MiPod – there are too many other variables in play. But it would certainly take ammunition away from critics who think Microsoft lacks the design savvy, technical chops, or familiarity with customers needed to launch a hit mobile device. Taking similar steps might have saved the Ultra-Mobile PC, or UMPC, a touch-screen mini-tablet-PC device designed by Microsoft, introduced by Samsung and Asus in May – and universally criticized as overpriced and underpowered.

Microsoft seems to want to do better this time: it has reportedly assigned star executive J. Allard, vice president of the team that built the Xbox, to head the MiPod project. One big question is whether Allard can organize his team to meet the reported 2006 holiday delivery date. If that date slips, the way Vista’s launch date has repeatedly, it will give Apple time to plow ahead with next-generation iPods, which may include both Wi-Fi and text-to-speech capabilities. And perhaps the biggest unknown: whether Allard will be allowed to “think different” enough to make Microsoft cool again in the eyes of young gadget buyers and music listeners.